SOUTHFIELD, Mich., April 26, 2018 /PRNewswire/ -- Lear
Corporation (NYSE: LEA), a leading global supplier of automotive
seating and electrical systems, today reported record results for
the first quarter 2018. Highlights include:
- Record sales of $5.7 billion, up
15% from a year ago
- Record net income of $353.7
million and record adjusted net income of $344.5 million, compared to $305.8 million and $300.1
million, respectively, in the prior year
- Record core operating earnings of $490.5
million, up 14% from a year ago
- Record earnings per share of $5.16 and record adjusted earnings per share of
$5.10, up 19% from a year ago
- Increased share repurchase authorization to $1.5 billion and raised quarterly cash dividend
by 40% to $0.70 per share
- Announced record 2018 to 2020 sales backlog of $3.2 billion ($4
billion including non-consolidated sales)
- Quoting activity in electrification and connectivity is
accelerating
- Increasing full year outlook for sales and earnings
"In the first quarter, we again delivered record financial
results and accelerated our sales growth," said Ray Scott, Lear's president and chief executive
officer. "We are launching many new programs this year with
added content and opportunities for profitable product mix
improvement. In Seating, we have 145 launches, 70% of which
are on high-content crossovers, SUVs and pickups. In
E-Systems, we have 160 launches, including the industry's most
sophisticated connected gateway module. With our unique
product capabilities in Seating and E-Systems and the continued
convergence of the two segments, we are extremely well positioned
for future growth. In addition to our record backlog of
awarded programs, this year we are quoting $1 billion in annualized new business related to
the trends of electrification and connectivity alone. Our top
priority is to capitalize on the significant growth opportunities
in front of us while continuing to maintain our operational
excellence, generate strong cash flow and deliver superior returns
to our shareholders," Scott concluded.
First Quarter
Financial Results
(in millions, except
per share amounts)
|
|
|
2018
|
|
2017
|
Reported
|
|
|
|
Sales
|
$5,733.7
|
|
$4,998.5
|
Net income
|
$353.7
|
|
$305.8
|
Earnings per
share
|
$5.16
|
|
$4.35
|
|
|
|
|
Adjusted
(1)
|
|
|
|
Core operating
earnings
|
$490.5
|
|
$431.5
|
Adjusted net
income
|
$344.5
|
|
$300.1
|
Adjusted earnings per
share
|
$5.10
|
|
$4.27
|
In the first quarter of 2018, sales were $5.7 billion, an increase of 15%
year-over-year. Excluding the impact of foreign exchange,
sales were up 8%. This increase reflects the addition of new
business in both product segments and the acquisition of
Grupo Antolin's seating business,
partially offset by lower production volumes on key Lear
platforms. Sales for our Seating and E-Systems segments were
up 12% and 24%, respectively. Excluding the impact of foreign
exchange, sales for our Seating and E-Systems segments were up 6%
and 15%, respectively.
Core operating earnings were up $59
million to $491 million, or
8.6% of sales, primarily reflecting the increase in sales. In
the Seating segment, margins and adjusted margins were 7.8% and
8.3% of sales, respectively. In the E-Systems segment,
margins and adjusted margins were 13.6% and 14.1% of sales,
respectively.
Earnings per share were $5.16. Adjusted earnings per share were up
19% to $5.10 per share, reflecting
improved operating earnings, a lower tax rate and a reduced share
count.
Net cash provided by operating activities was $237 million, and free cash flow (1)
was $74 million.
(1)
|
For more information
regarding our non-GAAP financial measures, see "Non-GAAP Financial
Information" below.
|
Increased Share Repurchase Authorization and Dividend
On February 13, 2018, Lear's Board
of Directors authorized an increase in Lear's share repurchase
authorization and extended the term to December 31, 2020, bringing the total value of
shares that may be repurchased to $1.5
billion. In addition, the Board increased Lear's
quarterly cash dividend by 40% from $0.50 per share to $0.70 per share.
During the first quarter of 2018, we repurchased approximately
829,000 shares of our common stock for a total of $155 million. As of the end of the first quarter,
we had a remaining share repurchase authorization of $1.35 billion, which reflects approximately 10%
of our total market capitalization at current market
prices.
Since initiating the share repurchase program in early 2011, we
have repurchased 44.9 million shares of our common stock for a
total of $3.7 billion at an average
price of $81.72 per share. This
represents a reduction of approximately 43% of our shares
outstanding at the time that we began the program.
Full Year 2018 Financial Outlook
Lear is increasing its full year 2018 financial outlook for
sales and earnings based on our strong first quarter performance
and outlook for the remainder of the year.
Sales in 2018 are now expected to be in the range of
$21.8 billion to $22.0 billion, up $400
million from the prior outlook. The increase in sales
reflects the strengthening of foreign currencies compared to the
U.S. dollar, as well as higher production on key Lear
programs. Core operating earnings are now expected to be in
the range of $1,790 million to
$1,810 million, up approximately
$40 million from the prior
outlook.
Pretax operational restructuring costs are estimated to be
$70 million, capital expenditures are
expected to be $660 million, and
depreciation and amortization expense is estimated to be
$500 million.
The Company's effective tax rate on an adjusted basis is
expected to be approximately 22%. Adjusted net income is
expected to be in the range of $1,250
million to $1,270
million.
Net cash provided by operating activities is estimated to be
$1.9 billion, and free cash flow is
expected to be more than $1.2
billion.
Lear's 2018 financial outlook is based on a global industry
production assumption of 95.7 million vehicles, up 3% from
2017. On a regional basis, vehicle production is forecasted
to be 17.2 million units in North
America, up 1%, 23.4 million units in Europe and Africa, up 2%, and 27.0 million units in
China, up 3%. The financial
outlook is also based on an average exchange rate of $1.21/Euro for the year.
Certain of the forward-looking financial measures above are
provided on a non-GAAP basis. The Company does not provide a
reconciliation of such forward-looking measures to the most
directly comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in
the United States ("GAAP") because
to do so would be potentially misleading and not practical given
the difficulty of projecting event driven transactional and other
non-core operating items in any future period. The magnitude of
these items, however, may be significant.
Webcast Information
Lear will webcast a conference call to review the Company's
first quarter 2018 financial results and related matters on
April 26, 2018, at 8:00 a.m. Eastern Time, through the investor
relations link at lear.com. In addition, the conference call
can be accessed by dialing 1-800-789-4751 (domestic) or
1-973-200-3975 (international). The audio replay will be
available two hours following the call until May 11, 2018, at 1-855-859-2056 (domestic) or
1-404-537-3406 (international) with a Conference I.D. of
58073012.
Non-GAAP Financial Information
In addition to the results reported in accordance with GAAP
included throughout this press release, the Company has provided
information regarding "pretax income before equity income,
interest, other (income) expense, restructuring costs and other
special items" (core operating earnings or adjusted segment
earnings), "adjusted net income attributable to Lear" (adjusted net
income), "adjusted diluted net income per share available to Lear
common stockholders" (adjusted earnings per share), "tax expense
excluding the impact of restructuring costs and other special
items" and "free cash flow" (each, a non-GAAP financial
measure). Other (income) expense includes, among other
things, non-income related taxes, foreign exchange gains and
losses, gains and losses related to certain derivative instruments
and hedging activities, gains and losses on the disposal of fixed
assets and the non-service cost components of net periodic benefit
cost. Adjusted net income represents net income attributable
to Lear adjusted for restructuring costs and other special items,
including the tax effect thereon. Adjusted earnings per share
represents diluted net income per share available to Lear common
stockholders adjusted for the redeemable noncontrolling interest
adjustment, restructuring costs and other special items, including
the tax effect thereon. Free cash flow represents net cash
provided by operating activities, less capital expenditures.
Management believes the non-GAAP financial measures used in this
press release are useful to both management and investors in their
analysis of the Company's financial position and results of
operations. In particular, management believes that core
operating earnings, adjusted net income, adjusted earnings per
share and tax expense excluding the impact of restructuring costs
and other special items are useful measures in assessing the
Company's financial performance by excluding certain items that are
not indicative of the Company's core operating performance or that
may obscure trends useful in evaluating the Company's continuing
operating activities. Management also believes that these
measures are useful to both management and investors in their
analysis of the Company's results of operations and provide
improved comparability between fiscal periods. Management
believes that free cash flow is useful to both management and
investors in their analysis of the Company's ability to service and
repay its debt. Further, management uses these non-GAAP
financial measures for planning and forecasting future periods.
Core operating earnings, adjusted net income, adjusted earnings
per share, tax expense excluding the impact of restructuring costs
and other special items and free cash flow should not be considered
in isolation or as a substitute for net income attributable to
Lear, diluted net income per share attributable to Lear, cash
provided by operating activities or other income statement or cash
flow statement data prepared in accordance with GAAP or as a
measure of profitability or liquidity. In addition, the
calculation of free cash flow does not reflect cash used to service
debt and, therefore, does not reflect funds available for
investment or other discretionary uses. Also, these non-GAAP
financial measures, as determined and presented by the Company, may
not be comparable to related or similarly titled measures reported
by other companies.
For reconciliations of these non-GAAP financial measures to the
most directly comparable financial measures calculated and
presented in accordance with GAAP, see the attached supplemental
data pages which, together with this press release, have been
posted on the Company's website through the investor relations link
at lear.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding anticipated financial results
and liquidity. The words "will," "may," "designed to," "outlook,"
"believes," "should," "anticipates," "plans," "expects," "intends,"
"estimates," "forecasts" and similar expressions identify certain
of these forward-looking statements. The Company also may provide
forward-looking statements in oral statements or other written
materials released to the public. All statements contained or
incorporated in this press release or in any other public
statements that address operating performance, events or
developments that the Company expects or anticipates may occur in
the future are forward-looking statements. Factors that could
cause actual results to differ materially from these
forward-looking statements are discussed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2017, and its other Securities and
Exchange Commission filings. Future operating results will be based
on various factors, including actual industry production volumes,
commodity prices and the Company's success in implementing its
operating strategy.
Information in this press release relies on assumptions in the
Company's sales backlog. The Company's sales backlog reflects
anticipated net sales from formally awarded new programs less lost
and discontinued programs. The calculation of the sales backlog
does not reflect customer price reductions on existing or newly
awarded programs. The sales backlog may be impacted by various
assumptions embedded in the calculation, including vehicle
production levels on new programs, foreign exchange rates and the
timing of major program launches.
The forward-looking statements in this press release are made as
of the date hereof, and the Company does not assume any obligation
to update, amend or clarify them to reflect events, new information
or circumstances occurring after the date hereof.
About Lear
Lear Corporation was founded in Detroit in 1917 as American Metal
Products. Today, Lear is one of the world's leading suppliers
of automotive seating systems and electrical systems
(E-Systems). Lear serves every major automaker in the world,
and Lear content can be found on more than 400 vehicle
nameplates. Lear's world-class products are designed,
engineered and manufactured by a diverse team of approximately
165,000 employees located in 39 countries. Lear currently
ranks #151 on the Fortune 500. Lear's headquarters are in
Southfield, Michigan.
Further information about Lear is available at lear.com or follow
us on Twitter @LearCorporation.
Lear Corporation
and Subsidiaries
|
Condensed
Consolidated Statements of Income
|
|
|
|
|
|
(Unaudited; in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Month
|
|
|
Period
Ended
|
|
|
March
31,
|
|
April
1,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
Net sales
|
|
$
5,733.7
|
|
$
4,998.5
|
|
|
|
|
|
Cost of
sales
|
|
5,102.3
|
|
4,416.0
|
Selling, general and
administrative expenses
|
|
155.4
|
|
155.7
|
Amortization of
intangible assets
|
|
13.1
|
|
10.1
|
Interest
expense
|
|
20.7
|
|
20.8
|
Other (income)
expense, net
|
|
(5.6)
|
|
3.7
|
|
|
|
|
|
Consolidated income
before income taxes and
|
|
|
|
|
equity in net income
of affiliates
|
|
447.8
|
|
392.2
|
Income
taxes
|
|
77.7
|
|
89.1
|
Equity in net income
of affiliates
|
|
(4.1)
|
|
(15.4)
|
|
|
|
|
|
Consolidated net
income
|
|
374.2
|
|
318.5
|
Net income
attributable to noncontrolling interests
|
|
20.5
|
|
12.7
|
|
|
|
|
|
Net income
attributable to Lear
|
|
$
353.7
|
|
$
305.8
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share available to Lear common stockholders
|
|
$
5.16
|
|
$
4.35
|
|
|
|
|
|
Weighted average
number of diluted shares outstanding
|
|
67.6
|
|
70.3
|
Lear Corporation
and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
|
(Audited)
|
ASSETS
|
|
|
|
|
Current:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,268.5
|
|
$
1,500.4
|
Accounts
receivable
|
|
3,795.2
|
|
3,230.8
|
Inventories
|
|
1,266.3
|
|
1,205.7
|
Other
|
|
769.7
|
|
676.1
|
|
|
7,099.7
|
|
6,613.0
|
Long-Term:
|
|
|
|
|
PP&E,
net
|
|
2,560.9
|
|
2,459.4
|
Goodwill
|
|
1,464.7
|
|
1,401.3
|
Other
|
|
1,555.9
|
|
1,472.2
|
|
|
5,581.5
|
|
5,332.9
|
|
|
|
|
|
Total
Assets
|
|
$
12,681.2
|
|
$
11,945.9
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current:
|
|
|
|
|
Short-term
borrowings
|
|
$
2.9
|
|
$
-
|
Accounts payable and
drafts
|
|
3,483.0
|
|
3,167.2
|
Accrued
liabilities
|
|
1,801.4
|
|
1,678.1
|
Current portion of
long-term debt
|
|
9.1
|
|
9.0
|
|
|
5,296.4
|
|
4,854.3
|
Long-Term:
|
|
|
|
|
Long-term
debt
|
|
1,950.0
|
|
1,951.5
|
Other
|
|
709.9
|
|
694.1
|
|
|
2,659.9
|
|
2,645.6
|
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
170.3
|
|
153.4
|
|
|
|
|
|
Equity
|
|
4,554.6
|
|
4,292.6
|
|
|
|
|
|
Total Liabilities
and Equity
|
|
$
12,681.2
|
|
$
11,945.9
|
Lear Corporation
and Subsidiaries
|
|
Supplemental
Data
|
|
|
|
|
|
|
|
|
(Unaudited; in
millions, except content per vehicle and per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
April
1,
|
|
|
|
|
2018
|
|
2017
|
|
|
Net
Sales
|
|
|
|
|
|
|
North
America
|
|
$
2,055.1
|
|
$
1,989.2
|
|
|
Europe and
Africa
|
|
2,443.2
|
|
1,915.4
|
|
|
Asia
|
|
1,044.1
|
|
923.3
|
|
|
South
America
|
|
191.3
|
|
170.6
|
|
|
Total
|
|
$
5,733.7
|
|
$
4,998.5
|
|
|
|
|
|
|
|
|
|
Content per
Vehicle1
|
|
|
|
|
|
|
North
America
|
|
$
467
|
|
$
439
|
|
|
Europe and
Africa
|
|
$
406
|
|
$
316
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow2
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
236.8
|
|
$
278.9
|
|
|
Capital
expenditures
|
|
(162.8)
|
|
(120.8)
|
|
|
Free cash
flow
|
|
$
74.0
|
|
$
158.1
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
$
120.2
|
|
$
96.9
|
|
|
|
|
|
|
|
|
|
Diluted Shares
Outstanding at end of Quarter3
|
|
66,847,903
|
|
69,481,327
|
|
|
|
|
|
|
|
|
|
Core Operating
Earnings2
|
|
|
|
|
|
|
Net income
attributable to Lear
|
|
$
353.7
|
|
$
305.8
|
|
|
Interest
expense
|
|
20.7
|
|
20.8
|
|
|
Other (income)
expense, net
|
|
(5.6)
|
|
3.7
|
|
|
Income
taxes
|
|
77.7
|
|
89.1
|
|
|
Equity in net income
of affiliates
|
|
(4.1)
|
|
(15.4)
|
|
|
Net income
attributable to noncontrolling interests
|
|
20.5
|
|
12.7
|
|
|
Pretax income before
equity income, interest and
|
|
|
|
|
|
|
other (income)
expense
|
|
462.9
|
|
416.7
|
|
|
Restructuring costs
and other special items -
|
|
|
|
|
|
|
Costs related to
restructuring actions
|
|
24.0
|
|
8.8
|
|
|
Acquisition
costs
|
|
0.4
|
|
1.6
|
|
|
Acquisition-related
inventory fair value adjustment
|
|
-
|
|
1.7
|
|
|
Other
|
|
3.2
|
|
2.7
|
|
|
Core operating
earnings
|
|
$
490.5
|
|
$
431.5
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income Attributable to Lear2
|
|
|
|
|
|
|
Net income available
to Lear common stockholders
|
|
$
348.3
|
|
$
305.8
|
|
|
Redeemable
noncontrolling interest
|
|
5.4
|
|
-
|
|
|
Net income
attributable to Lear
|
|
353.7
|
|
305.8
|
|
|
Restructuring costs
and other special items -
|
|
|
|
|
|
|
Costs related to
restructuring actions
|
|
24.0
|
|
8.8
|
|
|
Acquisition
costs
|
|
0.4
|
|
1.6
|
|
|
Acquisition-related
inventory fair value adjustment
|
|
-
|
|
1.7
|
|
|
Litigation
|
|
0.3
|
|
-
|
|
|
Gain related to
affiliate
|
|
(10.0)
|
|
-
|
|
|
Other
|
|
3.4
|
|
1.3
|
|
|
Tax impact of special
items and other net tax adjustments 4
|
|
(27.3)
|
|
(19.1)
|
|
|
Adjusted net income
attributable to Lear
|
|
$
344.5
|
|
$
300.1
|
|
|
|
|
|
|
|
|
|
Weighted average
number of diluted shares outstanding
|
|
67.6
|
|
70.3
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share available to Lear common stockholders
|
|
$
5.16
|
|
$
4.35
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
share
|
|
$
5.10
|
|
$
4.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Content per Vehicle
for 2017 has been updated to reflect actual production
levels.
|
|
|
|
|
|
|
|
|
|
|
2
|
See "Non-GAAP
Financial Information" included in this press release.
|
|
|
|
|
|
|
|
|
3
|
Calculated using
stock price at end of quarter.
|
|
|
|
|
|
|
|
|
4
|
Represents the tax
effect of restructuring costs and other special items, as well as
several discrete tax items. The identification of these tax
items is judgmental in nature, and their calculation is based on
various assumptions and estimates.
|
Lear Corporation
and Subsidiaries
|
Supplemental
Data
|
|
|
|
|
|
|
(Unaudited; in
millions, except margins)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
March
31,
|
|
April
1,
|
|
|
|
2018
|
|
2017
|
|
Adjusted Segment
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
Seating
|
|
|
|
|
|
Net sales
|
|
$
4,329.9
|
|
$
3,868.0
|
|
|
|
|
|
|
|
Segment
earnings
|
|
$
339.5
|
|
$
320.3
|
|
Costs related to
restructuring actions
|
|
19.2
|
|
6.7
|
|
Other
|
|
(0.5)
|
|
1.7
|
|
Adjusted segment
earnings
|
|
$
358.2
|
|
$
328.7
|
|
|
|
|
|
|
|
Adjusted segment
margins
|
|
8.3%
|
|
8.5%
|
|
|
|
|
|
|
|
E-Systems
|
|
|
|
|
|
Net sales
|
|
$
1,403.8
|
|
$
1,130.5
|
|
|
|
|
|
|
|
Segment
earnings
|
|
$
190.8
|
|
$
164.9
|
|
Costs related to
restructuring actions
|
|
2.7
|
|
2.0
|
|
Other
|
|
3.9
|
|
1.2
|
|
Adjusted segment
earnings
|
|
$
197.4
|
|
$
168.1
|
|
|
|
|
|
|
|
Adjusted segment
margins
|
|
14.1%
|
|
14.9%
|
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multimedia:http://www.prnewswire.com/news-releases/lear-reports-record-first-quarter-2018-results-and-increases-full-year-financial-outlook-300636759.html
SOURCE Lear Corporation